Correlation Between Equity Income and Blue Chip
Can any of the company-specific risk be diversified away by investing in both Equity Income and Blue Chip at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Equity Income and Blue Chip into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Blue Chip Fund, you can compare the effects of market volatilities on Equity Income and Blue Chip and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Equity Income with a short position of Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Blue Chip.
Diversification Opportunities for Equity Income and Blue Chip
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Equity and Blue is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Blue Chip Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Fund and Equity Income is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Equity Income Fund are associated (or correlated) with Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Fund has no effect on the direction of Equity Income i.e., Equity Income and Blue Chip go up and down completely randomly.
Pair Corralation between Equity Income and Blue Chip
Assuming the 90 days horizon Equity Income Fund is expected to generate 0.77 times more return on investment than Blue Chip. However, Equity Income Fund is 1.3 times less risky than Blue Chip. It trades about 0.17 of its potential returns per unit of risk. Blue Chip Fund is currently generating about 0.11 per unit of risk. If you would invest 3,975 in Equity Income Fund on September 3, 2024 and sell it today you would earn a total of 597.00 from holding Equity Income Fund or generate 15.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Income Fund vs. Blue Chip Fund
Performance |
| Timeline |
| Equity Income |
| Blue Chip Fund |
Equity Income and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Blue Chip
The main advantage of trading using opposite Equity Income and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income position performs unexpectedly, Blue Chip can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Blue Chip will offset losses from the drop in Blue Chip's long position.| Equity Income vs. Principal Capital Appreciation | Equity Income vs. Diversified International Fund | Equity Income vs. Brown Advisory Growth | Equity Income vs. Midcap Fund Class |
| Blue Chip vs. Midcap Fund Class | Blue Chip vs. Equity Income Fund | Blue Chip vs. Largecap Growth Fund | Blue Chip vs. Smallcap Fund Fka |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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